Tweaking taxes

Washington can take a lesson from forward-thinking states

Despite the impressions you may be getting from an increasingly powerful and autocratic Washington, this is still a union of 50 states.


Happily, that allows the various states to experiment with policy, particularly with regard to taxes.

So, while Washington continues its unprecedented borrowing and spending spree without signs of slowing, governors and legislatures are still free to find their own way.

A couple of governors, for instance – in Louisiana and Nebraska – have called for ending their states’ income taxes. And in many other ways, states are looking for ways to attract more business and economic development.

It’s notable that they’re not doing it by spending or taxing more, as is Washington’s way, but by eyeing strategic tax cuts and other incentives.

Washington could learn a lesson from them, if it wasn’t so busy trying to run our lives and telling us how things are going to be.

Already, seven states have no income tax: Texas, Florida, Washington, Alaska, Nevada, South Dakota and Wyoming.

As Reuters news agency notes, the freedom of 50 states to chart their own destinies allows them “to test long-debated tax ideas.”

In fact, Washington is about the only place where innovation and reform aren’t being seriously discussed. That’s not just a sad state of affairs, but it also likely puts a drag on the national economy.

“When it comes to getting pro-growth tax reform done this year, the only real opportunities are at the state level,” Reuters quoted Patrick Gleason, director of state affairs for Americans for Tax Reform.

Liberals worry that such tax changes may hurt the lower and middle classes. If so, states will have to adjust accordingly. More likely, however, is a scenario in which certain states grow economically faster than others, rising the tide for all boats.

A more realistic concern is that less forward-thinking states will continue on their current path – which includes public pensions and benefits that may ultimately consume their budgets – and that they will someday go to Washington for bailouts. That would mean that more responsible, well-managed states would be asked to subsidize the errors and lack of vision of other states.

Taking money from one state’s taxpayers and giving it to another’s – isn’t that taxation without representation?

That should not be allowed to happen. If we could wave a wand to make Washington more functional – well, first we’d have them balance the budget and stop regulating us to death. And we’d have congressmen go home after a couple terms. But then we’d have them pass a law saying no states can be forced to bail out other states for having created their own messes.

States are competing in the marketplace of ideas.

Let them.



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